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The Official Liquidator Majestic Financiers (P) Ltd. Vs. Hargurchet Singh Kandola and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCompany Petition Appeal No. 69 of 1967
Judge
Reported inILR1969Delhi839
ActsCompanies Act, 1956 - Sections 446(2)
AppellantThe Official Liquidator Majestic Financiers (P) Ltd.
RespondentHargurchet Singh Kandola and ors.
Advocates: H.R. Sawhney,; N.S. Sistani,; M.K. Chawla,;
Cases ReferredDhrendra Chandra Pal v. Associated Bank of Tripura Ltd.
Excerpt:
.....of sub-section (2) of the companies act cover the same field as was covered by section 45 b of the banking companies act, and it cannot, thereforee, but be held that it is open to the official liquidator to make applications for the purposes of any claims which may be made by or against the company. the object of bringing sub-clauses (b), (c) & (d) into section 446(2) was to avoid inevitable delay and expense which would be incidental to the institution and trial of a suit, and there is no reason why, as a matter of construction, even a money claim by the official liquidator against any person has to be made only by a suit and nto by a petition.; that the court fee payable on a claim made by the official liquidator on a petition under section 446 (a) would be in accordance with the..........judge distinguished the case reported in : 1955crilj555 which had dealt with section 45b of the banking companies act and held that the proceedings under section 45b were nto proceedings in the nature of a suit but summary proceedings specially provided for expeditious disposal of winding-up proceedings in the case of banking companies with liberty or power to the court to frame its own procedure for the disposal of such applications. the learned judge, thereforee, held that applications. made by the official liquidator have to be treated as regular suits for the purposes of court-fee and court-fee was to be paid thereon under the mysore court-fees and suits valuation act, 1958 this decision undoubtedly supports the contention which has been raised on behalf of the respondents but for.....
Judgment:

Audrey, J.

(1) Out of the Issues framed on October 25, 1968, Issues Nos. 1, 2 and 5 have been ordered to be treated as preliminary Issues and it is these Issues which are being disposed of by this order.

(2) These Issues are:-

Issue (1) Is the application nto competent on the ground that the Official Liquidator should have filed a suit Issue (2) Should Court-fees on the petition have been paid as upon a suit in accordance with Schedule 1 of the Court-fees Act Issue (5) Can the respondents question the correctness of the amounts shown to their debit in the books of account of the company

(3) Mr. H. R. Sawhney, who appears for the Official Liquidator, has stated that it will be open to the respondents to question the correctness of the amounts shown to their debit in the books of account of the company and, thereforee, Issue No. 5 be decided against the petitioner. In view of the confession which has been rightly made, Issue No. 5 is decided against the petitioner.

(4) The other two Issues i.e. Issue Nos. 1 and 2 are interconnected and will be dealt with together. The contention on behalf of the respondents is that these petitions which have been filed by the Official Liquidator should nto be entertained as petitions and, in any event, they should have borne court-fee ad valorem on the claims made therein in accordance with Schedule I of the Court Fees Act.

(5) The company was ordered to be wound up by an order dated December Ii, 1964, which had been passed by the Punjab High Court (Circuit Bench) Delhi. Jaimal Singh Makin, Hargurchet Singh Kandola and R. Sen, who are respondents in C.P. 70, C.P.69 and C.P. 71 of 1967 respectively were Directors of this company. A petition has been filed also against Messrs Society Pictures (C.P. 68 of 1967) in which the aforesaid three Directors were partners. The Official Liquidator has, in these petitions, claimed large amounts from the several respondents on the basis of entries in the books of account of the company and, in so far at least as the Director-respondents are concerned, also on the basis of statements made in the balance-sheet and profit and loss account of the company.

(6) The applications have been made under clause (b) of subsection (2) of section 446 of the Companies Act, 1956. Subsection (2) as it stands after the amendment of 1960 contains clauses (b), (c) and (d) which were nto existing prior to this amendment. Prior to this amendment, sub-section (2) of this section provided that the winding up Court shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain or dispose of any suit or proceeding by or against the company. It is nto disputed by Mr. P. C. Khanna, learned counsel for one of the respondents, that even prior to the amendment of 1960 a suit under sub-section (2) of this section could have been filed in the Company Court but such a suit, if filed, would have to bear court-fee in accordance with the provisions of the Court Fees Act, and, in suits for money, ad valorem in accordance with Schedule I of the Court Fees Act.

(7) Clauses (b), (c) and (d) of sub-section (2) which have been brought in by the amendment of 1960 enlarge the scope of the jurisdiction of the Company Court because these sub-sectioas comprehend the entertainment and disposal by the Company Court of 'any Claim' by or against the company; any application under section 391 and any question of priorities. In so far as the present controversy before me is concerned, consideration is required only of clauses (a) and (b) of sub-section (2). The relevant portion of sub-section (2) is in these terms:-

'THE Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of- (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India).'

(8) The opening part of sub-section (2) contains the non-obstante clause. thereforee, it cannto be doubted that the Company Court will have jurisdiction to entertain or dispose of nto only any suit or proceeding by or against the compa.ny but also any claim made by or against the company. Because 'suit' is mentioned in sub-clause (a) and 'claim' is mentioned in sub-clause (b), it has been contended by Mr. Khanna that 'claim' cannto include 'suit' and that, thereforee, if a 'claim' is filed which is in reality a 'suit' , then the 'claim' has to be treated as a 'suit' and has to bear court-fee as on a suit.

(9) Reliance is placed on behalf of the respondents on the decision reported in The Official Liquidator, High Court of Mysore, Bangalore v. T. Muniswamy Achary and others (1). In this case the Company Judge had made a general direction that the Liquidator may take out 'applications in the nature of suits' against such debtors of the company who had either disputed the Liquidator's claim or failed to appear in response to notices issued under section 477 of the Companies Act. Following these directions, the Liquidator made an application and the question arose as to court-fee payable thereon. The learned Single Judge observed that the nature of the suit as a suit does nto get changed or transformed into a mere application or a proceeding other than a suit and relying upon entry No. 44 of list I and entry No 3 of List Ii in the Seventh Schedule to the Constitution came to the conclusion that court-fee on such an application had to be calculated under the Mysore Court-Fees and Suits Valuation Act, 1958. The learned Judge distinguished the case reported in : 1955CriLJ555 which had dealt with section 45B of the Banking Companies Act and held that the proceedings under section 45B were nto proceedings in the nature of a suit but summary proceedings specially provided for expeditious disposal of winding-up proceedings in the case of Banking Companies with liberty or power to the Court to frame its own procedure for the disposal of such applications. The learned Judge, thereforee, held that applications. made by the Official Liquidator have to be treated as regular suits for the purposes of court-fee and court-fee was to be paid thereon under the Mysore Court-fees and Suits Valuation Act, 1958 This decision undoubtedly supports the contention which has been raised on behalf of the respondents but for reasons to be stated hereinafter, I find it difficult to agree with this decision.

(10) Reliance is then placed on section 4 of the Provincial insolvency Act which provides in sub-section (1) as follows:-

'SUBJECT to the provisions of this Act, the Court shall have full power to decide all questions whether of title or priority, or of any nature whatsoever, and whether involving matters of law or of fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient, or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case.' and also upon the decision reported in Ex-parte Dickin, In re Pollard (2) in which it was observed that the Court of Bankruptcy, even if it possesses jurisdiction under section 72 of the Bankruptcy Act, 1869, to enforce a simple money demand by the trustee of a bankrupt's property against a third party (as to which quoere), ought nto to exercise the jurisdiction, but ought to leave the demand to be enforced by the trustee in an action in the ordinary way. The reason for this observation is stated in the opinion of Jessel, M.R., where he has observed that 'it never could, I think have been the intention of the Legislature that the Court of Bankruptcy should exercise a jurisdiction to decide the title to any real estate in the country which was claimed by a man who happened to be a bankrupt, for it must be remembered that the decision of the Court of Appeal in Bankruptcy cannto be appealed from to the House of Lords except with the leave of the Court. But, assuming that the Court of Bankruptcy has jurisdiction, I can see no reason why in the present case an action should nto be brought by the trustee against Murrell & Crisfiekl for the debt. No question of bankruptcy law is involved, whereas a question of character is involved, which the parties might nto desire to have decided in a County Court. There are also some difficult questions of law, such as the application of the doctrine of Ex parte Wariiig (1)- a doctrine the application of which is nto easily understood. I can see no ground for the Court of Bankruptcy assuming jurisdiction in this case. I may go further and say that whenever there is a simple money demand by the trustee of a bankrupt's property, which is capable of being tried by the ordinary tribunals.'

(11) The English practice and the provisions in section 4 of the Provincial Insolvency Act cannot, in my view, help the respondents. It is obvious that the amendment of 1960 which incorporated clauses (b), (c), (d), in sub section (2) of section 446 of the Companies Act were intended to confer a very comprehensive jurisdiction upon the Company Court to decide all claims by or against the company. Another object for making these amendments was to empower the Court to decide all claims and other quesions whatsoever by or against any company so that winding up proceedings might be expedited. It was to attain this object that section 45B had been added to the Banking Companies Act. This section is in these terms:-

'THE High Court shall, save as otherwise expressly provided in section 45C, have exclusive jurisdiction to entertain and decide any claim made by or against a banking company which is being wound up (including claims by or against any of its 'branches in India) or any application made under 'section 391 of the Companies Act, 1956', by or in respect of a banking company or any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of a banking company, whether such claim or question has arisen or arises or such application has been made or is made before or after the date of the order for the winding up of the banking company or before or after the commencement of the Banking Companies (Amendment) Act, 1953.'

(12) It will be seen that clauses(b) (c) and (d) which have been added to sub-section (2) of section 446 of the Companies Act cover the same field as was covered by section 45B of the Banking Companies Act. The scope of section 45B of the Banking Companies Act was considered by the Supreme Court in the case reported in re: Dhrendra Chandra Pal v. Associated Bank of Tripura Ltd. where an application for eviction of a tenant of a bank had been filed by the Liquidator before the High Court and that was purported to be done under section 45B of this Act. It was contended that the High Court while exercising powers under section 45B had no power to deal with a question relating to ejectment in summary proceedings initiated on an application. The Supreme Court dealt with the scheme of the Banking companies Act and dealing with the sections in Part III-A of this Act observed that these sections constituted a wide departure from the corresponding provisions of the Indian Companies Act and referring to the provisions of the Indian Companies Act, they observed:-

'UNDER various sections thereof the liquidator, after an order for winding up of a company is made, can approach a Company Court for exercising certain powers in aid of and to expedite the process of liquidation. The procedure normally adopted for the purpose is by way of application. But the scope of matters in respect of which the liquidator can obtain the help of the Company-Court by summary procedure is rather limited. In respect of other matters and particularly in the matter of collecting assests recovering properties from third parties, (nto covered by sections 185 and 186) the liquidator has to invoke the help of the appropriate Court in the ordinary way. This as is well- known leads to a great deal of inevitable delay and expense.'

And came to the conclusion that it was to avoid these delays and expense that the sections in Part III-A of the Banking Companies Act were brought in. The Supreme Court came to the conclusion that section 45B of the Banking Companies Act was nto confined to claims for recovery of money or recovery of property, moveable or immoveable, but comprehends all sorts of claims which relate to or arise in the course of winding up and they further observed that the normal proceeding that the section contemplated must be taken to be a summary proceeding by way of application. thereforee, it cannto be doubted that in so far as the language employed in sub clauses (b), (c) and (d) of sub-section (2) of section 446 is concerned, the law as laid down by the Supreme Court must apply and it cannto but be held that it is open to the Official Liquidator to make applications fcr the purpose of any claims which may be made by or against the company.

(13) If the object of bringing sub-clauses (b), (c) and (d) was to avoid inevitable delay and expense which would be incidental to the institution and trial of a suit, I do nto see any reason why, as a matter of construction, even a money claim by the Official Liquidator against any person has to be made only by a suit and nto by a petition. The fact that a suit is contemplated by clause (a) of sub-section (2) does nto go counter to this construction because if the Official Liquidator makes a claim by a petition, it is open to the Company Court to say, by reason of the controvelsies that are raised in the claim petition, that such a claim should be made by a suit and, if it is so ordered, the Official Liquidator will have to file a suit even though before the very Court and in such an event pay the court-fee that is required to be paid in accordance with the provisions of the Court Fees Act and which, in claim for money, would be ad valorem on the subject matter of the claim.

(14) Mr. Khanna has then relied upon rules 6, 34 and 36 of the Company Court Rules, 1959. Rule 6 of the Companies Court Rules, 1959, talks of the practice and procedure and applies the provisions of the Code of Civil Procedure to all proceedings under the Act and these Rules. It is difficult to see how this rule helps the respondents in the contention that has been advanced. Rules 34 and 36 contemplate the decision of matters by affidavits and it is these two rules on the basis of which it is contended that in complicated matters, proceedings should nto be allowed to be instituted by applications but the direction should be to file a suit. It is true that the normal method of trial before a Company Court is by affidavits but that fact alone is nto sufficient to hold that 'claim' as mentioned in sub-section (2) (b) of section 336 of the Companies Act cannto include a 'suit' used in sub-section (2) (a) of this section. The section being as it is, I do nto find it possible to say, as a matter of construction, that 'claim' does nto include 'suit'. I think the only legitimate way to construe clause (a) and (b) of sub-section (2) of this section would be that although it is open to the Official Liquidator to file petitions before the Companies Court in respect of any claims, it is open to the Company Court to say, in view of the controversies that might arise or even the nature of the claim, that it will be proper to entertian and dispose of such a claim nto upon a petition but in a suit and, if that be the view of the Court, the Official Liquidator can be directed to file a suit rather than to continue with the petition.

(15) Then it is contended on behalf of the respondents that the controversies raised in this matter are such that they should nto be disposed of on a mere application and the Official Liquidator should be directed to file a suit. I have gone through the Issues and the pleadings of the parties have been read to me. In so far as the Official Liquidator is concerned, the case made out by him is simple and that case is that the respondents to these various petitions have withdrawn various amounts belonging to the company for their personal use and these amounts stand debited to them in the books of the company. The replies which have been filed by the various respondents try infer alia, to throw the blame with regard to these entries on each other. This fact by itself does nto persuade me to hold that the controversies which will have to be dealt with in these matters are such that they should more appropriate be tried in a suit. I have looked at the Issues which have been framed and which are to be tried. In my opinion, the subject matter of the Issues is nto such that they should be tried by a suit and nto by a petition.

(16) There is another consideration. If suits are filed, undoubtedly, court-fee will have to be paid in terms of thousands. I do nto see why the incurring of considerable expense for payment in court-fee should nto be a relevant consideration in coming to the conclusion that the proceeding should be by an application and nto by a suit particularly where the suits are nto against strangers but persons who are Directors of the company which is in winding-up and the control whereof is with the Company Court. It is possible that if the claims made in these petitions were against complete strangers, the Court might come to the conclusion that it will be better to relegate the Official Liquidator to regular suits but where the persons against whom claims are made have been Directors of the company, it would be more appropriate to determine the controversies on petitions which will be conducive to the avoidance of delay and expense. A suit will nto be the appropriate remedy from the point of view of expedition or expense in these case. If suits were to be filed and tried as such, then the progress of the winding up is likely to be stultified pending the disposal of the suits. thereforee, I am clearly of the view that there is no reason to compel me to direct the Official Liquidator to file the suit. Issue No. 1 is, thereforee, decided in favor of the Official Liquidator.

(17) On this view. Issue No. 2 does nto require any decision because if the Official Liquidator is nto to be relegated to a suit, then it cannto be doubted that the claims made by him in these petitions can be made by petitions on which proper court-fee in accordance with the court-fee prescribed by the Court-Fees Act as amended by Punjab Court Fees (Amendment) Act (No. 14 of 1958) as extended to Delhi for petitions has been paid. Issue No. 2 is also decided in favor of the Official Liquidator.

(18) The petitions will now be tried on merits on the remaining Issues. Parties may file their documents and list of reliance within a fortnight from to-day. Let these matters be listed on 20th February, 1969 for fixing dates for evidence.


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